Let there be two goods, X and Y.For individual A, the marginal utility of X is 2 while the marginal utility of Y is 1.If the prices of X and Y were both equal to $10, then individual A could improve his welfare even without an infusion of extra income by consuming:
A)more X even at the expense of consuming less Y.
B)more Y even at the expense of consuming less X.
C)more X only if consumption of Y could be maintained at the original level.
D)less X, but only if consumption of Y could be maintained at the original level.
E)none of the above.

Question

Quizplus · Accepted Answer

Since the marginal utility of X is twice that of Y for individual A, this suggests that they derive more satisfaction from consuming X compared to Y. Therefore, individually A could improve their welfare by consuming more of X even if it means consuming less of Y. Since the prices of X and Y are both equal to $10, individual A can afford to buy more of X without spending extra money, while reducing the consumption of Y to maintain the same level of expenditure.

Let There Be Two Goods, X and Y